21st February 2014

Transcripts of last week’s parliamentary questions on:

• On-the-ground inspections of drilling rigs by the Environment Agency and Health and Safety Executive
• Cost to the country of tax breaks for shale gas companies
• Cost of policing anti fracking protests
• Financial and economic benefits of fracking
• Liabilities scheme for fracking companies that go bust

 With thanks to theyworkforyou.com

13/2/14
Question by Mark Menzies (Fylde, Conservative)
What on-the-ground inspections have been planned by the Environment Agency for the two new proposed shale gas drilling sites in Fylde.

Answer from Dan Rogerson, Environment Minister
If the sites identified by Cuadrilla at Little Plumpton and Roseacre are granted planning permission along with the required permits from the Environment Agency, the Agency would inspect the sites during the preparatory works and the operational life of the sites, as well as at the end of operations. This would be done at a frequency appropriate to the risks that the sites present to the environment.

Once operational work has begun, the Health and Safety Executive and the Environment Agency will conduct joint inspections of the key operations at the sites. These meetings and visits may include other licensing or statutory bodies as appropriate

Question by Bridget Phillipson, Houghton and Sunderland South, Labour
What estimate has been made of the cost to the public purse of providing companies investing in the exploitation of onshore oil and gas and including shale gas an allowance equal to 75 per cent of their capital spend on such projects.

How much the recently announced tax allowance for the exploitation of onshore oil and gas and shale gas  will cost the public purse in tax years 2015-16, 2016-17 and 2017-18, and how such figures have been calculated.

Answer from Nicky Morgan, Economic Secretary to the Treasury
The estimated cost of the onshore oil and gas allowance, which was certified by the Office for Budget Responsibility, can be found on page 79 of the autumn statement: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263942/35062_Autumn_Statement_2013.pdf

In 2015-16 the estimated cost is negligible, in 2016-17 it is £5 million and in 2017-18 it is £20 million.

The assumptions and methodology underlying these costings can be found on page 46 of the policy costings document: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/263434/autumn_statement_2013 _policy_costings.pdf

This document highlights that beyond the forecast period, additional production and profits which would arise from successful onshore developments would be expected to increase Exchequer yield.

Question by Bridget Phillipson, Houghton and Sunderland South, Labour
(1) What the policy is on the use of non-public research in his [The Chancellor] Department’s publications;

(2) If he will publish a summary of the evidential basis for the statement that independent analysis shows that this allowance makes the UK tax regime for shale gas the most competitive in Europe;

(3) Whether his Department commissioned the report from Wood McKenzie; and whether it commissioned any other reports on this matter.

Answer from Nicky Morgan, Economic Secretary to the Treasury
The Government uses a wide variety of resources in the process of policy development.

The Wood Mackenzie report cited in the autumn statement document was not commissioned by HM Treasury and the Department has not commissioned any other reports on this matter. While the report is currently only available to Wood Mackenzie subscribers, they have confirmed that anyone interested in seeing a copy should contact them directly.

Question by Barbara Keeley, Worsley and Eccles South, Labour
In December, a protest started against exploration for shale gas in my constituency, which is now tying down 150 Greater Manchester police officers, with the cost being met out of Greater Manchester police budgets. That amounts to £40,000 a day for the 150 officers who are being deployed, and the cost could mount to £4million, as it did in Balcombe when there was a protest there.

Does the Minister agree that there should be some support for that? Why should Greater Manchester’s population suffer a much greater thinning out of our police force, especially given that we have already lost 1,000 officers? There is no consideration of this when a controversial issue like shale gas is dumped down somewhere—the Government are keen on shale gas exploration; I am not—and the local police force and taxpayers have to support the whole deployment.

Answer from Damian Green. Policing Minister
If there are special individual circumstances that affect a particular force, that force has the opportunity to apply for a special grant.

Before the hon. Lady rises to her feet again, let me deal specifically with fracking. She and I clearly disagree about the benefits of shale gas, but that is a debate for another time. The first anti-shale gas protests in Balcombe obviously affected the Sussex police, and they have applied for a special grant. I have to take evidence from Her Majesty’s inspectorate of constabulary before I decide whether the full grant or part of it should be given—that is the correct way to deal with taxpayers’ money—but that procedure is there for precisely this sort of event.

Question by Mark Menzies, Fylde, Conservative
What on-the-ground inspections have been planned by the Health and Safety Executive for the two new proposed shale gas drilling sites in Fylde.

Answer from Michael Penning, Minister of Work and Pensions
No operational work has yet taken place at either of the proposed shale gas extraction sites in Fylde. Once operational work begins HSE and the Environment Agency will conduct a joint inspection of the key operations at the two proposed shale gas extraction sites.

11/2/14
Question by Jim Cunningham, Coventry South, Labour
What consideration he has given to the possibility of creating a sovereign wealth fund from the revenue proceeding from fracking;

Will there be an assessment of the experience of Norway in creating a sovereign wealth fund from the revenue accrued from the country’s natural resources and the potential use of a spending cap.

Answer from Nicky Morgan, Economic Secretary to the Treasury
Shale gas represents a huge economic opportunity for the UK. It could create thousands of jobs, generate significant business investment and provide substantial revenue for the Exchequer in the future. The Government will not be able to forecast the scale or timing of this revenue, however, until more work is done to determine the extent of gas that can be technically and commercially recovered. It would therefore be inappropriate to indicate now how potential future revenue would be used.

In addition, it should be noted that diverting revenues from the Government’s finances to a specific shale fund, or one created by revenue from other natural resources, would come at a cost. The money cannot be spent twice. The Government would likely need to either raise additional tax revenue elsewhere or cut spending, to maintain the fiscal balance. The Government has no plans to assess the possibility, of creating a sovereign wealth fund from this revenue

Question by Jim Cunningham, Coventry South, Labour
Will the government ensure that any benefits that come from fracking will be experienced by the whole country and economy.

Answer from Michael Fallon, Energy Minister
The Government is determined that the UK economy will benefit from any shale gas development that might take place through benefits such as increased tax revenues, greater energy security, growth and jobs.

Question by Jim Cunningham, Coventry South, Labour
What proportion of revenues from fracking will accrue to (a) the Exchequer, (b) local communities and (c) private companies.

Answer from Michael Fallon, Energy Minister
While there is potential for shale gas to provide substantial revenue to the Exchequer in the future, until more work is done to determine the extent of gas that can be technically and commercially recovered, we will not be able to forecast the proportion of revenue that might accrue to the Exchequer or to private companies.

The Government is committed to ensuring that communities hosting shale developments benefit from development in their local area. That is why on 13 January the Government announced 100% local retention of business rates for shale production projects. In addition, the industry has brought forward a community benefits package which the Government has welcomed. At exploration stage, the industry will provide £100,000 per hydraulically fractured well site. The industry is also committed to providing 1% of revenue at production stage.

Statement by Lord de Mauley
I am pleased to inform your Lordships that the Department of Energy and Climate Change and the shale gas industry are working to put in place a robust scheme that would cover liabilities even if the relevant operator is no longer in business. They are also in discussion with leading insurers about proposals to build expertise and capacity in the insurance market to facilitate the development of products specifically appropriate for unconventional operations, which in turn could facilitate the development of an industry-wide scheme. In addition, while we already have a robust regulatory framework in place, I can confirm that it will be reviewed and refined as appropriate as we move towards the production phase.

10/2/14
Question by Roger Godsiff, Birmingham, Hall Green, Labour
What discussions have there been with councils on fracking and business rates.

Answer from Brandon Lewis, Local government minister
My Department holds regular discussions with representatives of local government on business rates and the rates retention scheme. We will engage with interested parties including local government on regulations to implement 100% local business rates retention for shale gas production.

Question by Roger Godsiff, Birmingham, Hall Green, Labour
What are the reasons for allowing councils to keep 100 per cent of business rates from fracking operations.

Answer from Brandon Lewis, Local government minister
Allowing local authorities to keep 100% of business rates on shale gas production sites is part of our long-term economic plan to build a stronger, more competitive economy, create more jobs and secure a better future for Britain. We believe communities that host a shale gas site should see a concrete benefit. The industry has committed to a package for communities that host a shale gas site which includes a payment of £100,000 for each hydraulically fractured well at the exploratory stage, as well as 1% of all revenues from production. Local councils will also benefit from shale gas production as well by keeping 100% of business rates from shale gas production—double the current figure of 50%. This commitment could be worth up to £1.7 million a year for a typical site. It will be funded by central Government and will ensure that local government feels a direct financial incentive, in addition to local jobs and growth supported by shale gas development

Question by Jim Cunningham, Coventry South, Labour
What contribution he expects fracking to make to the UK economy?

Answer from Michael Fallon, Energy Minister
There is potential for shale gas development to provide a substantial contribution to the UK economy in the future. Until more work is done to determine the extent of gas that can be technically and commercially recovered, we will not be able to accurately predict the entire contribution it can make.

The Government is determined that the UK economy will benefit from any shale gas development that might take place through benefits such as increased tax revenues, greater energy security, growth and jobs. On 13 December last year, we published for consultation, an environmental report as part of the process of strategic environmental assessment for further oil and gas licensing onshore. On a high activity scenario, the report estimates that oil and gas activities which might be carried out on new licences might create 16,000 to 32,000 new full-time equivalent positions in the peak development phase, including direct, indirect and induced jobs.

Prior to this report, the Institute of Directors estimated that 74,000 direct jobs could be created from the entire shale industry, including those direct jobs created from new licences.